All sports betting winnings are taxable income and must be reported to the IRS regardless of amount — that rule has not changed. What has changed, beginning tax year 2026, is how much of your losses you can use to offset those winnings. Previously, a bettor who itemized deductions could write off gambling losses dollar-for-dollar against gambling winnings. Starting 2026, losses are capped at 90% of winnings, meaning 10 cents of every dollar in winnings is now permanently exposed to income tax even if your overall betting record shows a net loss for the year. For a high-volume sports bettor running six-figure handle across multiple sportsbooks, that 10% floor can translate into a meaningful additional tax liability.

Consider a practical example: a bettor finishes the year with $80,000 in documented winnings and $75,000 in documented losses — a net profit of $5,000. Under the old rules, losses offset winnings dollar-for-dollar, and only the $5,000 net gain would be taxable. Under the 2026 rule, the deductible loss ceiling is 90% of $80,000, or $72,000. That leaves $8,000 in taxable gambling income — $3,000 more than the actual economic profit — before any other deductions. Bettors who operate near break-even will feel this shift most acutely, since the cap punishes scenarios where gross winnings are high but net gain is thin. For a full breakdown of IRS mechanics and withholding rules, see the Sports Betting Taxes FAQ: What the New 2026 Rules Mean for Bettors.

Separately, sportsbooks are required to withhold 24% of proceeds when winnings exceed $5,000 and are at least 300 times the original wager. That withholding is a credit against your total tax bill, not a final payment — so bettors who clear multiple large parlay wins during the year may still owe additional taxes after withholding, particularly when the 90% cap reduces the offsetting value of their losses. State tax exposure compounds this further; operators in New Hampshire, New York, and Rhode Island pay a 51% gross gaming revenue tax, the highest in the country, costs that influence how those books price markets and structure promotions.

How does the 90% cap compare to the old dollar-for-dollar rule?

Scenario Gross Winnings Documented Losses Max Deductible Loss (2026 Rule) Taxable Gambling Income
Break-even bettor $50,000 $50,000 $45,000 (90% of $50,000) $5,000
Slight net winner $80,000 $75,000 $72,000 (90% of $80,000) $8,000
Net loser, high volume $30,000 $35,000 $27,000 (90% of $30,000) $3,000 (loss excess disallowed)

The table illustrates that even a bettor who loses money overall can end the year with a taxable gambling income figure under the new cap, because losses beyond 90% of winnings are simply disallowed — they cannot be carried forward or applied elsewhere on the return. This represents a structural disadvantage for recreational and semi-professional bettors alike, and makes accurate record-keeping — tracking every wager, win, and loss with timestamps — far more important than it was under prior law.

Does the sportsbook platform you use affect your tax situation?

The 90% cap applies at the federal level regardless of which licensed operator you use, but platform choice does influence how well your records are maintained. Licensed US sportsbooks — the operators covered in our Best Online Sportsbooks in the USA — 2026 Rankings — provide downloadable bet history and annual win/loss statements that are essential for substantiating itemized deductions. Offshore, unlicensed books typically offer no such documentation, leaving bettors unable to verify losses to the IRS and therefore unable to claim any deduction at all. A review of how one major operator handles account documentation is available in the DraftKings Sportsbook Review: Is It Worth Signing Up in 2026?.

Do bonus bets count as winnings for the 90% cap calculation?

Bonus bet profits are treated as gambling winnings by the IRS, which means they factor into the gross winnings figure against which the 90% loss ceiling is calculated. The stake portion of a bonus bet is never returned on a win — only the profit is paid out — so the taxable event is smaller than with a cash wager of the same size, but it is still a taxable event. Bettors who rely heavily on promotional currency should understand those mechanics before signing up; the Sportsbook Bonus FAQ: How Wagering Requirements and Bonus Bets Work covers how bonus bet profits interact with playthrough requirements and cash value.

Deducting gambling losses requires itemizing deductions on Schedule A, which means forgoing the standard deduction. For many casual bettors, the standard deduction will still exceed their itemized total, making the 90% cap moot in practice — but for high-volume bettors whose losses are substantial, itemizing remains the only path to any deduction at all. Legality and tax treatment vary by state, so bettors should consult a qualified tax professional familiar with their state's conformity to federal gambling loss rules. 21+ only. Gambling problem? Call 1-800-GAMBLER.